From challenges of hiring to maintaining product relevance, small and medium businesses face countless obstacles every day, and accounting is one of the big one. Not only are business finances a complex, ever-changing entity, but they’re also the engine of any operation. A good financial situation can keep a business running, while too many financial hardships can cause even the most pristine machine to sputter and stall out. When it comes to accounting, small and medium businesses are often out of their element and at a disadvantage compared to their larger and more established counterparts. According to Business Insider, 50% of small businesses fail in the first five years; 29% run out of cash while 82% experience problems with cash flow. When it comes to finances, where does it all go wrong? Here are the five most common financial challenges for small business owners.
Accounting is an important component of business operations, regardless of the size of the company. However, smaller businesses often face unique accounting challenges that larger businesses may not encounter. Accounting is the language of business that speaks about financial growth. It translates numbers into a comprehensible statement about business profitability. Lotus Analytics offers an entire platform of customized solutions for businesses ranging from Accounting & Finance Analysis & Reports to Bookkeeping and Financial Planning & Budgeting to sustain your business.
Small Business Accounting in 2018 is based on a survey involving more than 300 small business owners or managers who deal with their business’ finances in detail. The aim of the survey was to find out how small businesses keep track of their books and what kind of accounting issues they encounter. The main findings of this survey are as follows:
• The overwhelming majority (95%) of small business owners believe their financial records are accurate. However, experts think otherwise.
• Similarly, 93% of business owners are confident they filed their taxes correctly. Interestingly, despite this confidence, 30% of them still believe they overpay their taxes.
• More than half of participating business owners (67%) keep track of their finances with the recommended accrual basis method. However, businesses with less than ten employees tend to still use the cash basis method.
• Despite the potential risks and complications, 27% of business owners don’t have separate personal and business bank accounts.
• Business owners believe their main accounting and financial challenges are unforeseen expenses (35%), undivided personal and business expenses (23%), late payments (21%), outdated financial records (11%), and clerical mistakes (11%).